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America's dependence on foreign lending to subsidize spending we can't pay for may be reaching the end of its rope as foreign investors lose confidence in America's Ponzi scheme of massive public and private debt accumulation. Quotable:

The wide range of declining currency inflows into numerous types of US financial assets makes it almost certain that the dollar, beset by global security concerns, trade-war anxiety and the crushing weight of the twin US current-account and fiscal deficits, is heading for a serious plunge against other currencies.

The declining inflows, if they were to continue beyond the current month, would ripple ominously across the globe. A substantially cheaper dollar means serious trouble for the export-led economies that have traditionally depended on the United States as importer of last resort, making their goods more expensive. It is already causing a feeding frenzy in the shark-like world of currency traders, who have the ability to wreck entire economies through currency speculation.

The latest US Treasury Department figures, released on Wednesday, show that net capital inflows into the country fell precipitously, from about US$50 billion (42 billion euros) in August to $4.2 billion in September, the lowest since the near-collapse and bailout of the Long Term Capital Management hedge fund rattled markets in 1998.

The new data are raising fears that the US may have difficulty funding its current-account deficit, which ran at about $46 billion a month in the first half of the year and is expected to reach $550 billion by year-end. The fiscal deficit reached $374 billion in the fiscal year ended in October, by far the largest in US history, although off-budget expenditures could carry that as high as $450 billion.

With crucial foreign investor confidence waning, foreign purchases of US Treasury bonds have fallen to their lowest level on a monthly basis since February. The Treasury report said foreigners bought a net $5.6 billion of treasuries in September, down from $25.1 billion in August.

Foreigners engaged in net selling of "agency" debt sold by the quasi-governmental agencies Freddie Mac (Federal Home Loan Mortgage Corp) and Fannie Mae (Federal National Mortgage Association), both of which package and sell domestic home mortgages of various kinds, for the first time since October 1998, getting rid of a net $3.2 billion after buying $8.9 billion the previous month. The lack of interest in bonds was not replaced by buying of equities. Private accounts and central banks sold some $6.3 billion of equities.

Via Robert Blumen who writes:

Due to the status of the dollar as the world's reserve currency, Americans have enjoyed decades of consumption at the expense of the rest of the world. They export, we import. They save, we spend. In return, we send them dollars that ... the Fed create with their confetti machines. And what do foreigners do with these dollars? They turn around and invest them back into US securities, forming a capital inflow that offsets the current account deficit. They are also kind enough to fund a big chunk of our Federal deficit through their purchase of Treasury securities. But this process seems to be gradually slowing. Purchases of US Treasuries have fallen ... If this trend continues the dollar must suffer a depriciation.